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Qualifying Offers and Draft Pick Compensation – What Happens with Arrieta and Davis?

As soon as the World Series ends, eight members of the 2017 Chicago Cubs will become free agents: Alex Avila, Rene Rivera, Jon Jay, Jake Arrieta, John Lackey, Wade Davis, Koji Uehara, and Brian Duensing.

And while some could return and others could retire, most will probably catch on somewhere else and continue their big league careers. In that case, the Cubs could receive draft pick compensation for their loss, but only if the exiting player was with the team all season and leaves as a qualified free agent (and even then, there are some more caveats).

Because the qualifying offer/draft pick compensation system was already complicated before it was changed last winter in the new Collective Bargaining Agreement, I thought we’d take this time to go over what could happen with the Cubs free agents this winter.

First, the super-short version: If Team X extends a qualifying offer (which is simply the mean salary of the league’s top 125 players on a one-year deal) to one of their exiting free agents and he denies it and signs elsewhere, Team X will get an additional pick in the upcoming draft (meanwhile, the signing team would lose a pick). The relative position of those picks will be tied to a team’s market size, payroll, and a couple of other related factors (we’ll get into the specifics shortly).

Of course, a team like the Cubs can’t just go and hand out eight qualifying offers to their exiting free agents for extra picks, because that QO is expected to be worth upwards of $18.1M, which is far too high of a one-year salary for many of those players (and remember, a player can only be a qualified free agent if he was with his team all season – which means Alex Avila and Rene Rivera are not eligible).

Now let’s get a little more specific. Although losing a qualified free agent used to result in a compensation pick just after the first round of the draft, it now lands after Competitive Balance Round B (after the second round) …. That is, aside from the two exceptions.

Getting a Draft Pick Caveats:

If the team losing a free agent paid the luxury tax last season (i.e. had a big payroll), their compensation pick comes after the fourth round.

If the team losing a free agent received revenue sharing money last season (i.e. has a small market) and watches the free agent sign a contract worth at least $50M, the compensation pick comes after the first round.

Since the Cubs do not project to go over the luxury tax this past season, nor received revenue sharing money, they would then be compensated with a pick after Competitive Balance Round B (if they lose a qualified free agent this winter). In case you’re wondering, Competitive Balance Round B ended after the 75th pick last season.

On the flip side … if the Cubs sign a qualified free agent, they’ll lose a draft pick. But unlike previous seasons, it’s not necessarily a team’s highest overall pick.

Losing a Draft Pick Caveats:

If the team signing a qualified FA paid the luxury tax in the preceding season, it will lose its second AND fifth-highest picks in the draft (regardless of round), as well as $1M of its international bonus pool in the upcoming period. Ouch.

If the team signing a qualified FA did not pay the luxury tax, but does contribute to revenue sharing (i.e. larger market teams with more reasonable payrolls), it would lose its second highest pick in the draft and $500K of it’s upcoming international bonus pool.

If the team signing a qualified FA did not pay the luxury tax and also received revenue sharing money last season, it loses ONLY its third-highest pick in the draft.

Since the Cubs, again, probably will not pay the luxury tax for this past season, but do contribute to revenue sharing, they’d fall into that second bullet: losing their second highest pick and $500K of their international bonus pool – which would still suck, but not NEARLY as bad as bullet one. (And not as bad as it was under the old system, when you’d lose your first pick.)

With all of the risks and rewards in mind, then, here’s what you can probably expect this winter.

The Cubs will extend qualifying offers to ONLY Wade Davis and Jake Arrieta, because those are the only two players who are absolutely certain to not only get offers elsewhere, but also offers more enticing than the prospect of a 1 year/$18.1 million QO from the Cubs.

If and when those two players sign elsewhere (likely) the Cubs will then get two picks after Competitive Balance Round B. More specifically, that means they’d get a first rounder, a second rounder, compensation pick one, compensation pick two, a third rounder, and so on. This roughly translates into four picks in the top 100, which isn’t too bad, especially when you consider the increased bonus pool component.

Everyone else, then, will simply be allowed to leave without any attachment to draft pick compensation, and will enter the market as untethered free agents.

It’s worth pointing out that these compensation picks are eligible to be lost if the Cubs sign a qualified FA themselves. In other words, if they lost Jake Arrieta and Wade Davis, but signed a multiple qualified free agents, they could lose their second rounder and one of their compensation picks. It’s extremely unlikely that the Cubs would sign multiple qualified free agents this offseason, of course, but I’m just pointing it out.

We’ll be sure to remind you of these rules and implications if/when these things come up, but it felt like a good time to get you a head start a recently changed system. It’s complicated, I know, but I think we covered the hard parts. Now, we’re ready for the offseason.

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